Wed | Sep 18, 2019

Salada pushes back against new JACRA directive

Published:Wednesday | March 6, 2019 | 12:11 AMAvia Collinder/Business Reporter
Salada Foods Jamaica’s flagship brand, Jamaica Mountain Peak instant coffee.
Dianna Blake Bennett, general manager of Salada Foods Jamaica Limited.

Instant coffee maker Salada Foods will meet with its regulator, JACRA, regarding new rules for bean content in its product formulations that the company says will hurt its bottom line.

The parties have confirmed the pending talks, but General Manager of Salada Dianna Blake Bennett says the date is still to be finalised.

The Jamaica Agricultural Commodities Regulatory Authority in February ordered Salada to adjust its formulation of instant coffee from 10 per cent local coffee content to 30 per cent, and demanded a commitment in writing to follow through on the directive by the end of June.

Failing that, the regulator threatened to withhold any further approvals to Salada to import green beans coffee used in manufacturing its instant powder.

In a notice posted on the Jamaica Stock Exchange, in which the listed company’s anger was evident, Salada warned the move would result in a big hit on profit. Jamaican coffee is more expensive than imported beans, which means a raising of the quota of local coffee in its blends would increase Salada’s raw material costs.

Bennett Blake added Monday in an interview with the Financial Gleaner that it would also make Salada uncompetitive in its own home market. Other instant products, she noted, are imported in large amounts for the local market without the same stipulation.

If JACRA does not back down, said the coffee executive, Salada would be forced to include in its formulation three times the amount of high-end Jamaica Blue Mountain Coffee, or JBM, which currently retails for US$25 per kilogramme.

Beyond that, the company – which describes itself as the only instant coffee maker in the anglophone Caribbean with sales hitting $1 billion last year for the first time in its 50-year history – already faces challenges sourcing enough supplies of Jamaican high mountain and low-mountain coffee for its manufacturing operation at the current quota, she added.

Technically, JACRA cannot issue directives on how Salada formulates its product, but the company is asserting that its directive on bean content for its instant coffee has that effect.

All coffee processors in Jamaica face quota requirements. In 2017, the Government introduced a 20 per cent local bean content requirement for roasted and ground coffee products, and this quota was increased to 30 per cent when JACRA became operational in 2018.

“What we are disputing is the change to our formulation for instant coffee. We are fully compliant with the rules for our roasted products. But our instant coffee is a different category of beverage and should be considered differently,” Blake Bennett said.

The increase in JBM content, she added, would change the taste profile and ”really impact the profitability of our company”.

The ministry responsible for agriculture, MICAF, introduced the 20 per cent rule at first to increase sales of local coffee which have slid in recent years.

Salada itself announced during Christmas a forward-buying arrangement for 25,000 boxes of coffee to assist farmers.

Blake Bennett said that JACRA’s letter caught Salada by surprise and that the company was hoping that the regulator would see reason when they sit for talks.